Consider the following utility function: U(x, y) = 10x + 2y. A consumer faces prices of...

Consider the following utility function: U(x, y) = 10x + 2y. A consumer faces prices of px = 1 and py = 2. Assuming that graphically good x is on the horizontal axis and good y is on the vertical axis, suppose the consumer chooses to consume 5 units of good x and 13 units of good y. What is the marginal rate of substitution (MRS) equal to?

Solutions

Expert Solution

MRS = MUx/MUy

U = 10X + 2Y

MUx = 10

MUy = 2

MRS = 10/2

= 5

Rahul Sunny answered 1 year ago

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